The Competition and Markets Authority has today escalated its probe into JD Sports’ £90m swoop for Footasylum, after the footwear retailer decided there wasn’t any “appropriate remedies” to avoid the phase 2 probe.
The CMA announced on September 19 that it had referred the proposed acquisition for a phase 2 investigation, but has this morning confirmed this escalation will take place, after JD Sports said it would “not be offering any undertakings”.
In a statement, JD said it had ”informed the CMA that it does not consider that there are any appropriate remedies that can be offered at this time to avoid a reference to phase 2 being made,” and strongly disagreed with the CMA’s view that the acquisiton would decrease competition.
JD boss Peter Cowgill said: ”The CMA has referred their review of this acquisition to phase 2 on the basis that it could be bad for competition and may have an impact on price. I strongly disagree with this. This transaction will not result in any price increases or a reduction in product ranges or service quality.
”The focus of all of our group businesses is to ensure we deliver a best in class, multichannel experience to our consumers by offering a compelling product proposition.”
The footwear retailer agreed to acquire Footasylum back in March, and boss Peter Cowgill said at the time the move would provide the enlarged group with “significant operational and strategic benefits”.
JD operates more than 400 stores across the UK, while Footasylum has around 70.
Footasylum has floundered since floating in October 2017, when the IPO valued the business at £170m.
JD’s main competitor, the Mike Ashley-owned Sports Direct, has also become involved in the ongoing saga.
On September 20, Sports Direct said the CMA’s escalation of an investigation into the proposed merger could itself lead to increased prices, and “have wider market implications beyond this transaction”.
The CMA has been very active this year in its regulatory business in regard to retail mergers and acquisitions.
The competition authority’s reason at the time was that the merger would result in increased prices for consumers, thanks to a “substantial lessening of competition” through UK grocery.
Sainsbury’s boss Mike Coupe rubbished the verdict, accusing the watchdog of “taking £1bn out of customers’ pockets”.
Asda owner Walmart said it was “disappointed” by the decision.